Reading the Fed’s Market Letter 01-29-15

With earnings season now at full throttle, disappointment over weaker-than-expected reports and guidance from several leading companies, has resulted in a market that just cannot get enough traction. Yesterday’s action also illustrates another factor that moves the market: the Fed. Stocks opened stronger, but, as the minutes of the latest FOMC meeting were released, they quickly erased their gains.

And this was despite the message of patience on future interest rate hikes given. Why? The statement language included significant changes in key places. The Fed acknowledged the U.S. economic growth, and called the pace of expansion “solid” (having replaced a word “moderate”). Since the FOMC’s interest rate decision is predicated, in part, on its assessment of the economy, the new adjective spooked some investors, who interpreted the language as a hawkish sign. Read more about Reading the Fed’s Market Letter 01-29-15

ECB Joins the Easing Crowd 01-22-15

News from the European Central Bank that it will expand its monetary stimulus with the monthly purchase of 60 billion euros (or roughly $69 billion) worth of government and private bonds until September 2016 buoyed European stocks, government bonds, as well as the U.S. stocks today. The announcement was widely expected, although the monthly sum is larger than the 50 billion euros rate reported earlier this week.

The ECB joins the club of other Central banks that, in their easing efforts, fight deflation and generate massive stimulatory efforts. While the U.S. just ended its own QE, it was the third such effort from our central bankers; the Bank of Japan is in the middle of its own easing—the size of monthly buying there, at 80 trillion yen, is tremendous in proportion to its smaller economy. Further, the Bank of England is keeping its bond-buying target intact at 375 billion pounds (on the same level since July 2012). Read more about ECB Joins the Easing Crowd 01-22-15

Increased Market Wariness 01-15-15

After a record-setting 2014, many investors need no prompting to book some gains. Growth concerns, weaker-than-expected earnings and geopolitical worries all aid the case, which is reflected in the market action over the first two weeks of the year.

The market added to the annual decline yesterday, after December retail sales missed economic estimates and recorded the largest decline since 2008, and today, as U.S. jobless claims rose to a four-month high. The result: the market as measured by the S&P 500 Index is down more than 3 percent in 2015. Read more about Increased Market Wariness 01-15-15

The Market Likes What It Read in the Fed Minutes 01-08-15

While the year got off to a rocky start, the market is back into the rally mode now, having erased its earlier losses. The change of mood is related to several factors, including yesterday’s release of the minutes of the latest Federal Reserve policy meeting.

Yesterday, in anticipation and upon the release of the Federal Reserve Board release of minutes from mid-December monetary policy meeting, the S&P 500 sported its first gain for this year after declining more than 4 percent in the previous five days on concerns over slowing global economic growth and the potential that Greece could exit the euro currency union. Read more about The Market Likes What It Read in the Fed Minutes 01-08-15

Here's to a Successful Year 12-31-14

Having broken through the 18,000 barrier last week, the Dow Jones Industrial Average hasn't been able to defend this symbolically important level in yesterday's and today’s trading. Sill, nobody would question that overall stock markets have had a good year: the S&P 500 was up 11.4 percent for 2014, with the blue chip average Dow Industrials, up 7.5 percent, trailing by only a few percentage points for the year; dozens of new all-time closing records for both indices have been set during the year too. 
We wish every investor strong portfolio gains in the upcoming year. The question for 2015 is whether the market will continue to reward most investors, or whether the underlying trends are changing. It’s hard to predict. Indeed, with the rally of the past five years, every calendar year was different, and every year experienced some kind of surprise, either positive or negative, to investors.